July 21, 2013

Medicaid and Medicare Poverty and Wealth the money train

There is money to be made off the poor:
Til debt do us part #2
By Melvin J. Howard

In 2007, MAXIMUS agreed to pay $30.5 million to resolve an investigation by the U.S. Department of Justice (DOJ) into False Claims Act allegations.  In a deferred-prosecution agreement, the company admitted responsibility for causing the District of Columbia to request Medicaid reimbursement as if the city‘s foster care agency provided reimbursable services to every single foster child when, as Maximus then well knew, that was not true. The DOJ described the settlement as demonstrating strong commitment to vigorously pursuing those companies that defraud the Medicaid program. However, both before and during the course of the litigation, MAXIMUS was almost inextricably linked to federal and state government agencies through contracts to provide services in Medicaid, Medicare, and other aid programs. Thus, the available sanction of exclusion from continued participation in federal aid programs was explicitly avoided as part of the settlement. Within two months of the settlement regarding allegedly fraudulent Medicaid claims, MAXIMUS won a five-year contract with the state of New York to provide Medicaid fraud-consulting services talk about the fox watching over the hen house. Within three months, the District of Columbia extended the same Medicaid revenue maximization contract with MAXIMUS that resulted in the alleged false claims. From the time of the settlement through the end of 2008, MAXIMUS entered into or extended contracts related to Medicaid or Medicare worth more than $240 million, including millions of dollars in contracts directly with the Centers for Medicare and Medicaid Services (CMS) the federal agency to which the allegedly fraudulent claims had been submitted. Then, one year after the DOJ settled its possible claims against MAXIMUS, the company won a contract to insert its services within the DOJ itself, to provide investigative and analytical support, consulting, technical services, financial management, and case-related professional support during the investigation and prosecution of criminal cases.

In addition to tax and debt instruments for raising revenue, intergovernmental grants are a primary tool for different levels of government to carry out their respective roles, and thus are a key application of fiscal federalism theory. In the United States, intergovernmental grants typically take the form of federal grant-in-aid programs, such aid programs has been to devolve more discretion and control to the states and local governments. The grant programs generally fall into three categories: matching programs such as Medicaid and Title IV-E Foster Care where state spending is required at a certain percentage match to receive additional federal funds; block grants like the current welfare cash assistance program (Temporary Aid to Needy Families, or TANF), which require states to maintain a certain level of state spending to receive the full federal block grant; and programs that are fully funded by the federal government but administered by the states, such as the Food Stamps Program.

Total federal spending on two of the largest matching grant programs, Medicaid and Title IV-E Foster Care, is projected to reach almost $320 billion in 2014. The programs are frequently targeted for contractor operational and consulting services and have been the subject of increased federal scrutiny into revenue maximization strategies. The programs provide an excellent example of intended fiscal federalism structure and the transformative effects that occur as the poverty industry‘s relationships with both the state and federal governments continue to grow. Numerous private companies have not only recognized the money to be made from poverty programs, but have concentrated on that niche as the core of their business offerings. With a mission of helping Government Serve the People, MAXIMUS provides operational and consulting services for almost all aspects of government health and human services programs. The poverty industry thrives on bad times. While many companies‘stocks were diving, MAXIMUS announced increased cash dividends to its shareholders. MAXIMUS also noted in its 2008 fourth quarter earnings call that there are more unemployed people and they look for job opportunities, and that plays right into the sweet spot for our welfare to work programs.

The depth and scope of the poverty industry‘s role in federal grant-in-aid programs and funds is striking, spurred in part by lobbying efforts, campaign contributions, and a revolving door of personnel between private industry and government leadership. The poverty–industrial complex has grown to the point where seemingly any task regardless of possible conflicts or limitations regarding inherently governmental functions can be contracted out.


A few years before former Illinois Governor Rod Blagojevich faced impeachment for allegedly trying to sell a U.S. Senate seat, he faced media scrutiny for his dealings with MAXIMUS. In 2005, The Chicago Sun Times reported on possible links between the company‘s receipt of state contracts and campaign contributions to Governor Blagojevich made by MAXIMUS and the company‘s lobbyists. According to the paper, MAXIMUS initially contracted with the state to develop a new plan to maximize federal aid dollars, and the company was then ―handed a waiver from state contracting rules by Blagojevich‘s administration so it [could] bid on the lucrative contract proposal it helped the state develop. The company had apparently given Blagojevich‘s political fund $25,500, and the company‘s lobbying firm—which employed the governor‘s former congressional chief of staff—donated another $80,300 to the governor.

Such scrutiny then reached to the west coast. According to the Los Angeles Times, when MAXIMUS faced the risk of losing a $32 million welfare-to-work contract with Los Angeles County, the company reacted by outspending its competitor on lobbying efforts by eight to one. The county‘s Department of Public Social Services concluded another company‘s bid was better, and a review panel and the auditor–controller upheld the decision on appeal. But after MAXIMUS spent $200,000 in lobbying fees and thousands more in campaign contributions, the paper explains, Los Angeles‘s five county supervisors voted to ignore the year-long review process and re-bid the contract to give MAXIMUS another chance.

Revolving Door

In addition to the influence of money and lobbying, there is a continuous flow of leadership between the ranks of government agencies and private contractors involved in federal grant-in-aid programs. While Governor of Wisconsin, Tommy Thompson was on the national forefront of the charge to privatize welfare and other poverty programs and he took his championship of privatization to the national stage as Secretary of the U.S. Department of Health and Human Services. When he left his federal post, Thompson was rewarded with multiple positions in the private sector. Simultaneously, Thompson joined Deloitte Consulting, leading the firm‘s Center for Health Solutions; became a partner with Akin Gump Strauss Hauer & Feld LLP, where he focused on developing solutions for clients in the health care industry, as well as for companies doing business in the public sector; joined former U.S. House Majority Leader Richard Gephardt as a member of the board of directors for Centene Corporation, a company that provides Medicaid managed care services in several states; became the board chairman of Logistics Health Incorporated and joined the boards of directors of several private companies in the healthcare field.

As states increasingly view federal grant-in-aid funds as a source of general revenue rather than a means to enhance program services. Once the bipartisan pick for Commerce Secretary in the Obama Administration, U.S. Senator Judd Gregg has since become a critic of the Administration‘s increased spending on federal aid programs to address the economic downturn and budget difficulties faced by states. However, when Senator Gregg was governor of New Hampshire and faced a growing state budget deficit, he initiated a process of claiming additional federal Medicaid matching funds, but with no additional net outlay of state funds. Then, rather than using the additional funds for Medicaid-related services, Gregg created a new general revenue line item in his state budget called ―Medicaid Enhancement Revenue. Gregg converted additional federal Medicaid payments into general use rather than using the federal dollars for Medicaid programs and services. The strategy led to such an increase in federal funds that the new general revenue line item accounted for 28% of New Hampshire‘s total general fund revenue in 1994.Gregg balanced the state‘s budget—indeed, to the point of a surplus by converting federal funds intended to aid the poor into general state revenue.